Impact of covid on relationship with supplier and workers

The actions taken by fashion companies to protect their profits by violating workers' rights
have had a devastating effect on vulnerable fashion industries workers during the COVID-19
pandemic. At the beginning of the epidemic, brands used their unlimited power to factory
suppliers to cancel agreed orders, pay suppliers for significantly reduced order prices, or
significantly extend payment terms.
These decisions have had a wounding effect on the 60 million fashion workers in the fashion
supply chain. Millions of workers have lost their jobs, have been paid for months, or are
forced to work for less than the normal wage - an amount that is never enough to pay for a
basic standard of living.
In the two years since the covid -19 pandemic, other brands continue to force suppliers to
lower their prices and increase payment terms, which increases workers' risk of
exploitation.
Workers' rights activists requested from companies to contribute to the wage bill -
estimated at US $ 11.85 billion in unpaid wages and terminations from March 2020 to
March 2021 alone - and to ensure that workers receive a rebate if they lose their jobs.

US$11.85bn 56%
US$18bn
Unpaid wages and Of orders below US$18bn
severance cost
Orders unpaid Orders unpaid
Estimate for garment Which suppliers
Worldwide
workers worldwide (from by retailers Worldwide
March 2020 - March
have been forced to by retailers
2021) accept

Import and export

In 2019, the global trade value of goods exported worldwide amounted to approximately 19
trillion U.S. dollars at current prices. ongoing crises of the novel coronavirus had rendered it
difficult to export goods due to a halt in transit facilities and lockdowns. There has been a
significant impact on the export industry due to the pandemic.
Many deliveries had to come to a sudden halt, thereby posing difficulties for both vendors
and buyers. Nevertheless, despite being deadly, the coronavirus has become the new
normal, and the world is gradually adapting to the many changes and alterations bought by
it. Hence, the export industry, too, has bounced back to normal after much detriment.
Following that, exporters are now actively ensuring to increase their losses by increasing
their exports, thereby contributing to themselves and the international export market.
The decline in exports has been mainly due to the global slowdown, which got aggravated
due to the current Covid-19 crisis. Which resulted in large scale disruptions in supply chains
and demand resulting in cancellation of orders,
The worldwide lockdown to control the spread of the coronavirus outbreak closed industrial
units and restricted the movement of goods. Top countries like China, Germany,
Bangladesh, Vietnam, India, Turkey, Italy, Mexico who are largest exporter of apparel hit by
covid 19 crisis. Textile and apparel exports constitute an important share of the total exports
in a range of countries: 85% in Bangladesh, 59% in Pakistan, 12% in Turkey, and 11% in
Egypt. Still, while many countries are well-positioned in the raw materials or the production
stage of the textile and apparel global value chain (GVC), they were only playing a limited
role in the absence of retail (comprised of marketing, branding and sales). Thus, they had
potential waited to be unlocked to reap more benefits from the global markets.

Source – Texpro

The textile industry of China is the largest manufacturer and exporter in the world with an
export turnover of $266.41 Bn. The factors driving the industry are – low-cost production,
raw material quality, industrial structure, modern high-tech machinery, label development
and work process in domestic consumer and global market. Due to covid 19 crisis China’s
position had been challenged and there could be emerging beneficiary countries coming out
of it but with the scenario of covid when all of Asia has been affected US, Europe has been
affected so there was a less chance that any emerging countries beneficiary country could
stand.
If we look at this data at the export of various countries to United States of America we
clearly see that here on January 2019 and January 2020 there has been a significant -53 %
percent of export of China to the United States and the largest beneficiary have been
Vietnam, Bangladesh and Indonesia.
Source – Texpro

If we look at this data published by Texpro which offers a platform to access quantitative
data with unique insights. Whether it is the APPAREL industry or the NONWOVENS &
TECHNICAL TEXTILES industry. Here is list of the top exporter countries of garment and
textile raw material exporter here we can clearly see by what percent covid impacted on the
export of various countries to European Union we clearly see that here on January 2019 and
January China’s export gone down so as Bangladesh export, India, Vietnam exports had also
gone down by
-7 and -3%
respectively.

Source Texpro

In comparison of EU, US the data of exporter countries who exported in United Kingdom we
can see the effect of Covid clearly. China export have gone down by -7%. Bangladesh, Italy,
Netherland have considerably changed up their percentage share in these markets while
countries like France, Cambodia, Turkey drastically hit and their export gone down by -45%,
-34% and -14% respectively.

Export of India –
Textile and apparel exports in 2020-2021 are almost 13% less (in dollar terms) than the
previous year, provisional data available with the Cotton Textiles Export Promotion Council.
The exports were worth $29 billion last year as against $34 billion in 2019-2020. Exports of
ready-made garments declined 20.78% last financial year compared with the previous year,
while exports of man-made textile items fell 21.20 %. Even for apparel exports, the industry
is anticipating a revival in global demand during the current financial year. A. Sakthivel,
chairman of Apparel Export Promotion Council, pointed out that in April last year, apparel
exports were just $127 million, while last month it was $1,294 million dollars.
Impact of covid on different countries in terms of Supply chains
Countries and business were taking action to reduce their risk and dependence on Chinese
manufacturing but even in those circumstances where countries are not manufacturing
directly in China these countries were largely hit by Covid because China is responsible for
close to 35% of all global textile exports. Even though China export market was challenged
by smaller rivals like Vietnam, Bangladesh Cambodia whose shipment raised dramatically at
the beginning of 2019. Its position was still at a position which was unmatched by any other.
Vietnam
Vietnam saw year on year export growth for garment declined to just 1.7 percent in January
and February in 2020 according to the textile industry group in Vietnam and that figure was
expected to fall to red in 2020 because the US and Europe was lockdown again against the
covid pandemic. Vietnam authority announced that export to European market was
decreased in the 1st and 2nd quarter by 8% in 2019.
Cambodia
In Cambodia 200 factories employing roughly 1.6 billion workers might temporarily closed
their operation as because they run out of raw material that they import from China.
Bangladesh
Bangladesh is the second largest exporter garment exporter after China but it had faced the
challenge for both imports of raw material and cancellation of orders. For raw material
Bangladesh largely dependence on China. Unfortunately the spread of virus to the west had
led to postponement and cancellation of orders brings back the industry on the brink of
disaster. Bangladesh factories lost an estimated 1.444 $billion million Doller due to
cancelled or suspended orders from international brands according to the report of Times
magazine.
India
Textile Industry is one among the biggest contributors to the country’s exports with around
11.4% share in India’s total export earnings for the fiscal period ended 2018-19 valuing to
almost USD 37.5 billion (INR 2,596 billion) and growing at a CAGR of seven since 2004-05.
The COVID-19 global pandemic A report by Wazir Advisors titled Impact of COVID-19
Scenario on European and US Apparel Market estimated that combined US and EU apparel
consumption might fall by about $308 billion, around 45 per cent less than projected in
2020. The spread of the virus has majorly impacted the textile industry as China has effects
on all 7.8 billion folks in similar and unique ways thus and also the EU is huge markets for
Indian textile products, per T Rajkumar, chairman of the Confederation of Indian Textile
Industry. The widespread impact of the covid-19 which has left no sectors unturned and is
expected to decelerate the growth projection of the textile and apparel industry in India,
which was once projected to grow at a CAGR of ~12% to reach USD 220 billion (INR 16,637
billion) by 2025-26(as per the data released by the Ministry of Textiles). Due the outbreak of
the pandemic, it is expected that the domestic market is seen shrinking by around 28%-30%
to USD 61 billion (INR 4,163 billion) led by the decline in the sales mostly in the Q1 for the
current financial year ending 20-21.

Source – Ministry of statistics planning & Implementation

Source – Directorate general of commercial intelligence and statistics, ministry of commerce

Cancellation of order
Covid 19 is a global pandemic, arrival of pandemic suddenly led to many large-scale order
cancellations, especially the orders from different countries. The export import was very
limited due to the lockdown restrictions. Apart from this, due to manpower shortage the
production was also very limited due to which orders were cancelled or delayed. Order
cancellation were majorly noticed for international transactions. For domestic transactions,
there were order cancellations only at starting of the pandemic due to logistic reasons.
Cancelled orders, manufacturing closures, and a drop in demand have resulted in a surge of
layoffs and missed wages for employees. The majority of garment production takes place in
nations with weak labour rights and social safety. Brands and retailers were cancelling and
post-ponding orders due to store closure and this is all because of a result of preventive
action for their staff as well as because of the limited consumer footfall.

 At least 1931 brands which have either delayed, put on hold, or straight up cancelled
their orders since the onset of Covid-19, as per data received from the Bangladesh
Garment Manufacturers and Exporters Association... The total value of these orders
is around $3.7 billion... About 470 of the buyers are from the US, and approximately
280 others from the UK. Italy and Canada follow closely with approximately 180 and
170 buyers fully or partially cancelling or putting their orders on hold. Fifth and sixth
in line are Germany and France...The brands which cancelled or postponed the
highest volume of orders were: Primark, H&M, C&A, Marks & Spencer and Tesco...
Primark tops the list with over $300 million worth of orders held up, postponed or
cancelled...
 Arcadia Group cancels orders sent letter to suppliers on 27 March 2020 and state
that all orders will be cancelled until further notice, and payment terms will be
extended by 30 days, with immediate effect.
Retail Store (Sales and its closure Worldwide)
The global textiles and apparel industry market had a retail market value of $1.9 trillion in
2019 and is projected by Boston Consulting Group to reach $3.3 trillion in 2030, growing at a
compound annual growth rate of 3.5%. Since the pandemic started, there was global
lockdown due to which stores were closed. When situation improved and stores were
allowed to restart, many people had switched to online shopping due to ease and hygiene
which resulted in decline of sales at retail stores. Cost of operations was same but decline of
sales turned loss for store owners, they were losing money and many weren’t able to afford
the cost of operations, due to which they were compelled to shut down the stores or
downgrade their stores. Many small stores got closed permanently and bug brands reduced
their number of stores. Post the pandemic started declining many stores were able to retain
but majority who suffered huge loss are closed permanently. 2020 is cancelled for a lot of
us, especially retail brands. With people staying indoors to reduce the infection of Covid-19,
retail brands see a huge drop in their sales – some up to 50%!
As the pandemic continue to affect businesses, a list of popular retail brands that are
severely affected – some even filing for bankruptcy protection are as follow

1) H&M- During the second quarter, H&M reported a loss of 1.4 billion as sales fell due to
Covid-19. As a restructuring plan for the business, H&M announced that it will be
shutting down 170 of its stores worldwide.
2) ESPRIT - In April 2020, ESPRIT announced that it will be closing down all its Asian stores
(except in China) by 30 June. The brand saw a downward spiral of its sales, which got
worse after the Covid-19 pandemic hit. During the end of their first quarter, Esprit’s
sales in Asia fell a whopping 52.2% and 25% globally.

3) Victoria’s Secret - As the pandemic continues to affect sales, Victoria’s Secret on 23

march 2019 announced that they will be closing down 250 of their stores in the US and
Canada. In the UK, the brand closed 25 of its stores and laid off 800 employees.

4) GAP- In 2019, Gap announced its plan to close 230 of its stores worldwide in the next 2
years. However, due to the Covid-19 pandemic, the brand seems to have hastened its
store closures as it recorded a 43% drop in the first quarter.

5) Guess - The brand announced that it will be closing down 100 of its stores worldwide
as sale plummeted. To minimize losses, Guess retrenched most of its store staff, 150 of
its corporate employees, and has cut the salaries of management significantly.
6) Century 21 – Century21 announced on 10 Sep 2019 that it would be going out of
business, filing for Chapter 11 bankruptcy protection in the United States Bankruptcy
Court for the Southern District of New York and preparing to close its 13 stores across
the U.S.

7) J.C. Penney: Long-struggling department store chain J.C. Penney filed for Chapter 11
bankruptcy protection on May 15 2019.

8) Centric Brands: It is a licensee company, which bought Zac Posen and produces
products for Tommy Hilfiger, Under Armour, Calvin Klein and more filed for Chapter 11
Bankruptcy on May 18 2019..
References
https://www.business-humanrights.org/en/from-us/covid-19-action-tracker/
https://www.thehindu.com/business/Industry/textile-exports-fell-13-in-fy21-on-covid-
19-impact/article34492931.ece
https://www.weforum.org/agenda/2020/08/how-the-textile-industry-can-help-countries-
recover-from-covid-19/
https://www.eworldtrade.com/blog/top-10-garments-exporting-countries-in-the-world/
https://www.fibre2fashion.com/industry-article/8471/top-10-exporting-countries-of-
textile-and-apparel-industry
https://www.youtube.com/watch?v=B4NnJFGZeLM
https://en.wikipedia.org/wiki/Impact_of_the_COVID-
19_pandemic_on_the_fashion_industry
https://www.firstpost.com/living/for-global-fashion-industry-impact-of-coronavirus-
pandemic-presents-both-crisis-and-opportunity-to-recast-itself-8493781.html
https://www.business-humanrights.org/en/from-us/covid-19-action-tracker/
https://www.theguardian.com/global-development/2020/oct/08/worlds-garment-
workers-face-ruin-as-fashion-brands-refuse-to-pay-16bn?CMP=Share_iOSApp_Other
https://worldofbuzz.com/hm-aldo-6-popular-fashion-brands-that-are-closing-down-
stores-due-to-covid-19/
https://fashionista.com/2020/05/fashion-beauty-brands-shut-down-bankrupt-
coronavirus